Staffordshire v. Cal-Western Reconveyance

• Decision Date: 06 December 2006
• Docket Number: A121664.,0204-03942.
• Citation: 209 Or. App. 528,149 P.3d 150
• Parties: STAFFORDSHIRE INVESTMENTS, INC., an Oregon corporation, Respondent-Cross-Appellant, v. CAL-WESTERN RECONVEYANCE CORPORATION, a California corporation, Cross-Respondent, and Bankers Trust Company of California, N.A., a national banking association, Defendant, and Homecomings Financial Network, a Delaware corporation, Appellant-Cross-Respondent.
• Court: Oregon Court of Appeals

149 P.3d 150

209 Or. App. 528

STAFFORDSHIRE INVESTMENTS, INC., an Oregon corporation, Respondent-Cross-Appellant, v. CAL-WESTERN RECONVEYANCE CORPORATION, a California corporation, Cross-Respondent, and Bankers Trust Company of California, N.A., a national banking association, Defendant, and Homecomings Financial Network, a Delaware corporation, Appellant-Cross-Respondent.

0204-03942.

A121664.

Court of Appeals of Oregon.

Argued and Submitted October 28, 2004.

Decided December 6, 2006.

Peter Salmon argued the cause for appellant-cross-respondent and cross-respondent Cal-Western Reconveyance Corporation. On the briefs were David E. McAllister and Moss Pite & Duncan, LLP.

James N. Esterkin, Portland, argued the cause and filed the brief for respondent-cross-appellant.

Before LANDAU, Presiding Judge, and BREWER, Chief Judge, and ARMSTRONG, Judge.

ARMSTRONG, J.

Defendant Homecomings Financial Network appeals from a judgment for plaintiff on plaintiff's claim for breach of contract.¹ Defendant assigns error to the trial court's grant of summary judgment in plaintiff's favor on its breach of contract claim and to the denial of defendant's motion for summary judgment on that claim. Plaintiff cross-appeals from the trial court's dismissal of its claim against Cal-Western Reconveyance Corporation (Cal-Western) for breach of warranty of authority. On appeal, we reverse the judgment in favor of plaintiff and remand with instructions to enter judgment for defendant; on the cross-appeal, we vacate and remand.

When a trial court grants a motion for summary judgment and denies a cross-motion for summary judgment, and the party assigns error to both rulings, we can review both rulings on appeal. Eden Gate, Inc. v. D & L Excavating and Trucking, Inc., 178 Or.App. 610, 622, 37 P.3d 233 (2002). We review the record to determine if there are genuine issues of material fact and, if there are none, we decide which party is entitled to judgment as a matter of law, viewing the evidence and all reasonable inferences that may be drawn from the evidence in the light most favorable to the party opposing the motion. ORCP 47 C; Jones v. General Motors Corp., 325 Or. 404, 420, 939 P.2d 608 (1997); Powell v. Bunn, 185 Or.App. 334, 338, 59 P.3d 559 (2002), rev. den., 336 Or. 60, 77 P.3d 635 (2003).

Bickell mortgaged a property to Headlands Mortgage Company (Headlands) on July 9, 1999. At that time, Rainey was a cotrustee of Bickell's living trust and had a power of attorney from Bickell to act on her behalf in financial transactions. The loan was secured by a trust deed that provided for the foreclosure sale of the property in the event of default by the grantor. Headlands was designated as the beneficiary of the trust, and Chicago Trust was the trustee. Headlands assigned its interest under the trust deed to Bankers Trust Company of California, N.A. (Bankers Trust), on March 27, 2000. Defendant serviced the loan for Bankers Trust. In January 2001, Bickell defaulted on her loan. Based on that default, Bankers Trust initiated a nonjudicial foreclosure sale of the property. Cal-Western was substituted for Chicago Trust as trustee for purposes of the foreclosure sale. Cal-Western recorded a notice of default on June 26, 2001, in Multnomah County. A notice of sale was published on July 23 and 30, 2001, and August 6 and 13, 2001, setting the sale date for November 8, 2001.

Rainey received notice of Bickell's default and Bankers Trust's election to sell on August 17. On September 10, 2001, Cal-Western recognized that, due to a late service of the notice, it would need to postpone the scheduled sale until December 17, 2001. Because the sale had been noticed for November 8, 2001, Cal-Western determined that it would be necessary to publicly announce the postponement at the sale on November 8. Bickell, who had been ill since late 1999, died on September 25, 2001, and Rainey was named the executor of her estate. On November 8, Cal-Western, through the auctioneer it authorized as its agent, announced the postponement of the sale until December 17, 2001. Also on November 8, defendant entered into a loan forbearance agreement with Rainey. However, on December 1, 2001, Rainey failed to make a scheduled payment under that forbearance agreement. On December 14, defendant sent an e-mail to Cal-Western, instructing it to proceed with the sale scheduled for December 17. On December 15, Rainey and defendant entered into a new forbearance agreement and, in accordance with that agreement, defendant told Rainey that the December 17 sale would be postponed. However, defendant did not notify Cal-Western of the new forbearance agreement or that it had agreed to postpone the sale.

On December 17, Rainey mailed a payment under the new forbearance agreement to defendant. He then went to the scheduled sale and informed the bidders and Cal-Western's auctioneer that he had entered into a new forbearance agreement and that the sale should therefore not proceed. The auctioneer made several attempts to contact defendant by telephone. While the auctioneer attempted to reach defendant, Rainey showed the bidders the receipt for the cashier's check that he had mailed to defendant as his first payment under the new forbearance agreement. The auctioneer's attempts to reach defendant were unsuccessful, according to Rainey. However, plaintiff's president stated in an affidavit that the auctioneer "received a return [phone] call from his office, announced that he had authority to conduct the sale and thereafter conducted the sale." In his own affidavit, Rainey stated that, after the auctioneer's telephone calls, the auctioneer, "despite [Rainey's] objections, eventually conducted the sale." Plaintiff was the high bidder at the auction and tendered a cashier's check to the auctioneer for the purchase price. Rainey contacted defendant about the auction later that day. After defendant learned that Cal-Western had auctioned the property, defendant contacted Cal-Western and instructed it not to issue the trustee's deed to plaintiff. On December 18, Cal-Western returned plaintiff's purchase funds.

Plaintiff subsequently filed this action for breach of contract and breach of warranty of authority, seeking to recover lost profits that it would have realized after reselling the property.² Defendant answered that the sale of the property was void because Rainey was not properly notified of the December 17 foreclosure sale, because the forbearance agreement between defendant and Rainey deprived Cal-Western of the power of sale, because the auctioneer mistakenly believed that he had authority to sell the property, and because defendant had redeemed the sale on Rainey's behalf by returning plaintiff's funds. Both parties moved for summary judgment. The trial court granted plaintiff's motion for partial summary judgment (reserving the issue of damages) and denied defendant's motion in its entirety. Thereafter, the court entered a judgment against defendant for plaintiff's damages, which were stipulated to be the difference in the fair market value of the subject property and plaintiff's high bid at the foreclosure sale, and dismissed plaintiff's case against Cal-Western.

Defendant appeals from that judgment and from the court's denial of its motion for summary judgment and entry of summary judgment for plaintiff on its breach of contract claim. Plaintiff cross-appeals, arguing that, if we conclude that defendant was entitled to summary judgment on plaintiff's breach of contract claim, then we should reverse the trial court's dismissal of plaintiff's claim for breach of warranty of authority against Cal-Western.

On appeal, defendant reiterates its position before the trial court and asserts four assignments of error. Because we conclude that Cal-Western lacked the statutory power of sale due to the forbearance agreement between defendant and Rainey, we resolve the appeal on that ground and do not consider the others.

Defendant argues that the forbearance agreement deprived Cal-Western of the power of sale under ORS 86.735 absent any default under the forbearance agreement. In those circumstances, according to defendant, contract formation is precluded as a matter of law, and the sale is therefore void. Plaintiff responds that, because the forbearance agreement provided that the default under the trust deed continued until performance under the forbearance agreement was completed, all of the statutory prerequisites to a foreclosure sale "remained in existence" and the trustee was obligated to execute and deliver a trustee's deed conveying the property to plaintiff.

The question is one of first impression in Oregon. ORS 86.735 provides:

"The trustee may foreclose a trust deed by advertisement and sale in the manner provided in ORS 86.740 to 86.755 if:

"* * * * *

"(2) There is a default by the grantor or other person owing an obligation, the performance of which is secured by the trust deed, or by their successors in interest with respect to any provision in the deed which authorizes sale in the event of default of such provision[.]"

Thus, in Oregon, as a precondition to the trustee's exercise of the power of sale, there must be a present default by the grantor for which sale is authorized by the terms of the deed. We therefore examine the effect of the parties' forbearance agreement on Bickell's default. That agreement, "[i]n consideration of the Lender's forbearance of its right to pursue remedies for default," established a revised payment plan for payments due under the trust deed. Specifically, it established monthly payments of $1,840.56, beginning December 25, 2001, and continuing through May 25, 2002, and one additional payment of $1,106.55, due June 25, 2002, after which time, according to the terms of the agreement, "[b]orrowers shall resume normal monthly payments." The agreement also included the following relevant provisions:

"We agree that the default continues...